DANSKE BANK, the Danish owner of National Irish Bank (NIB), has said it is sending “senior people” into the Irish bank after it reported a loss of €177 million for the first three months of the year following further heavy write-offs on commercial property loans.
Loan losses at NIB continued to rise on the bank’s commercial property and development book.
“You have to go deep into 2010 before you’ll see any changes in Ireland,” said Danske’s chief financial officer, Tonny Thierry Andersen. “We’ll make sure we send some of our more senior people there to help the Irish operations, as they don’t have a history of dealing with such a downturn.”
Mr Andersen said Danske had no plans to exit the Irish market. “You cannot live your life backwards and it was a good decision then, but in hindsight the timing was not. But we are in Ireland now and we have a good basis once the crisis is over,” he said.
Danske, which bought NIB in 2005, wrote down €395 million in goodwill outstanding from the €659 million takeover in 2008.
NIB set aside €198 million in the first quarter of this year to cover rising loan losses – a 40-fold increase on last year – and an increase from the €134 million in the final three months of last year.
The charge for the first quarter is the equivalent of 1.85 per cent of average loans and an annualised 7.4 per cent. The bank has set aside €426 million over the last five quarters to cover loan losses.
About 80 per cent of this sum relates to losses on the €3.3 billion commercial property book, which account for 30 per cent of loans.
NIB made an operating profit of €21 million for the first quarter, up 90 per cent on last year, but bad loans left the bank in the red.
This was despite a 13 per cent reduction in costs to €31 million and a 12 per cent increase in income to €52 million due to higher lending and wider margins.
“Our operating performance is robust and our focus on cost management is working well,” said chief executive Andrew Healy. “However, given the further deterioration in economic conditions, we have again this quarter set aside a substantial amount for potential loan losses.”
Deposits rose 12 per cent due to a 40 per cent growth in corporate deposits; retail deposits were down 7 per cent as a result of competition in this end of the market.
NIB’s loan book was up 11 per cent, but new lending has been flat for the last three quarters.
Danske rose in trading after reporting better-than-expected results. The bank posted a net profit of €200 million, down 33 per cent on last year, after setting aside €1.1 billion for loan losses, up from €100 million last year. The bank said that Ireland experienced lower economic growth and turmoil in the financial markets, as reflected in rising unemployment and falling house prices. – (Additional reporting, Bloomberg)
